Dofasco — An e-Business Case Study

Background: 

Dofasco Inc. is a NorthAmerican integrated steel maker, with a strong customer baseacross industries such as automotive, construction, energy,manufacturing, pipe and tube, appliance, container, and steeldistribution industries. By identifying the changes enabledby
e-business as a catalyst for permanent changes in thecompetitive environment, Dofasco has taken an earlyopportunity to move forward on a number of e-businessinitiatives.

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Strategy: 

Dofasco's corporatestrategy is to remain a market leader in the rapidly changingglobal steel manufacturing industry. Remaining a marketleader requires continued innovation and expansion intoemerging business opportunities such as e-business.Dofasco's corporate vision includes being "muchmore than a steel producer". A few of Dofasco'se-business strategic initiatives include participating in theAdvanced Network eXchange (ANX), also known as the AutomotiveNetwork eXchange, and taking an equity position in e-STEEL, asteel industry electronic marketplace.

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E-Business Initiatives: 

The e-business accomplishmentsat Dofasco are consistent with Dofasco's vision whichfocuses on being "much more than a steel producer".Information technology will continue to be a strategicinvestment at Dofasco. For example: 

  • The speed of information technology (IT) solutions delivery and on-going change must increase substantially as Dofasco pursues various business relationships and joint ventures.

    • As an illustration of overall technology literacy, 6 500 of 7 000 Dofasco employees are on Email, which management views as an investment in agility and internal information sharing.

  • IT must be flexible and capable of supporting new business paradigms.

    • For example, pricing strategies that currently support price per weight may have to support price per piece.

  • Appropriate IT business processes and/or technologies must be available to facilitate seamless customer/supplier links throughout the supply chain.

E-business initiatives atDofasco require the company to take an active role in ANX ande-STEEL.

The Advanced Network eXchangetm, also known as the Automotive Network eXchange®, replaces complex legacy non-standard networks.ANX is actively marketed outside of the automotive industryand provides trading partners, in several industry sectors, asecure and reliable global network IT infrastructure based onstandard Internet technologies. The ANX network wasintroduced by the Automotive Industry Action Group (AIAG) in1995 and has been in service for the past year. Itfacilitates the re-engineering of supply chains by connectingtrading partners and electronically allowing them tocollaborate on product design and development; soliciting andprocessing orders; and facilitating just-in-timemanufacturing and post shipping schedules.

e-STEEL provides the steelindustry with a neutral, secure online exchange, and a sourcefor up-to-date industry information. Suppliers use thee-STEEL Exchange to expand their marketing reach, grow theircustomer base, and reduce their transaction costs. Thee-STEEL Exchange helps buyers grow their base of suppliers,find better prices and lower their purchasing costs.

Dofasco has a number of othere-business-related initiatives and activities underway atthis time:

  1. Overhauling the legacy Electronic Data Interchange (EDI) infrastructure to manage a growing volume of conventional EDI more effectively.
  2. Launching support for browser-based "self-services" access to information such as order status via the public Internet and the ANX Internet. The intent of the launch is to accelerate the learning curve on how to use Internet technologies to improve customer service.
  3. Acquiring more information and insight about the ongoing role of various technology channels such as value-added networks (VAN's), public internet, the ANX internet, etc. Each channel has differences in service levels.
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Investments and Focus of Effort: 

Costs associated with ane-business solution can be incurred in many areas. Dofascomade significant investments in equipment purchases, generaldevelopment and maintenance as well as time and expenseassociated with the new functions and tasks required ofindividuals. Dofasco also invested considerable amounts oftime talking to their customers and suppliers to fullyunderstand their requirements and allow them to provide inputso that their requirements were met.

Dofasco has outlined foursteps required to improve business value using e-businesscapabilities. Dofasco's challenge is to maximise theirbusiness value by climbing these four steps: 

  1. Use of conventionalElectronic Data Interchange (EDI), which links businessprocesses.

    • Throughout the full length of the supply chain, the AIAG's (Automotive Industry Action Group) Manufacturing Assembly Pilot (MAP) initiative estimates that this can realise benefits of $71/car. Given the small profit margin in a typical car, this benefit could significantly increase OEM margins.
  2. Use of web capabilities toextend e-commerce to large and small companies.

    • For example, Dofasco points to Sears, which uses web-based EDI for smaller vendors
  3. Use of a secure, robustextranet, such as ANX, to enhance business relationships byextending business-critical value added services andcollaboration.

    • Order status, claims resolution and interactive product designs.

      For example, Dofasco points to 3M which claims e-commerce is the most important enabler to drive process improvement. While 3M doesn't offer direct electronic product sales, its web functions help customers find the right answers to their questions quickly. It also frees 3M's customer support staff from answering routine questions so that they can focus on value added activities.

  4. Develop electronic marketplaces where buyers and sellers come together
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Benefits: 

Benefits that Dofasco expectsas a result of its e-business initiatives such as ANX are asfollows: 

  1. lower operating costs;
  2. faster business cycles, primarily through rapid deployment of new applications on top of a common industry-wide infrastructure; and
  3. better communications service quality.
  4. ANX has implemented "industrial strength" technology that increases the infrastructure security, performance, and reliability. ANX is directly accountable for the performance of the network

Outcomes and benefits actuallyrealized by the Dofasco ANX solution to date include: 

  1. fewer errors with associated productivity improvements
  2. faster, more reliable exchange of information; and
  3. total EDI operating costs dropped by approximately 25 percent based on a flat fee, rather than per transaction cost model.
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Challenges: 

As with any initiative, whichimpacts so many areas, Dofasco has come across someroadblocks. The integration of business processes, vision andtechnology has provided some interesting challenges.Constantly changing customer requirements have also impactedthese initiatives. According to Dofasco, "customersappreciate our willingness to embrace these new concepts andour assisting them in reducing their costs".

The Dofasco e-businessexperience highlights some key issues when consideringe-business:

  • The importance of revitalizing supply chain business processes. These processes must be put under the same scrutiny that many companies have done with their internal processes, because there may be a larger payback.
  • In order to achieve maximum benefits an appropriate mix of new or revised business processes, and new technology must be deployed. This means that for those companies implementing e-business solutions, that the standard way of doing business will likely need to change, and new investments in technology required, in order to maximize the benefits.
  • Efforts must be made to standardize electronic communications as much as possible.
  • Companies must be relentlessly innovative and willing to take some risks in order to achieve better supply chain performance.
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Conclusions: 

The bottom line is that by theend of the year 2000, Dofasco will be able to providesuperior customer service by leveraging e-business to meetcustomer driven needs.

The e-business activitiesoutlined above affect almost every part of Dofasco'svalue chain. The activities both improve the efficiency ofexisting business activities and provide new services andproducts. Internal and external communications, internaloperations, procurement, marketing and promotions, outboundlogistics (including invoicing) and sales will all beaffected.

In addition to changingexisting business activities, Dofasco would like to challengetheir customers and suppliers to identify new opportunitiesand jointly develop with Dofasco solutions that will improvethe industry.

The successes at Dofasco canbe attributed in great part to strong executive sponsorshipand strong commitment from operating and technologydepartments. The success of the initiatives is also a resultof a comprehensive understanding of the expectations andpossibilities of an e-commerce solution:

  1. E-business is only a tool to support how Dofasco works with customers and conduct its business.
  2. E-business is neither a strategy nor a goal in and of itself. Dofasco views it simply as a component of its strategy which includes three characteristics:
  3. retaining the importance of face to face communication;
  4. offering customer service with a "have it your way" flavour; and
  5. complementing existing methods with e-business opportunities to enhance the service Dofasco offers its customers.

Dofasco has successfullycompeted in the global marketplace for many years. Theirleadership in e-business is another example of their abilityto adapt to their changing environment. Through strongleadership from their executive and a committed focus onadding value for their customers, Dofasco has quickly entereda new era in the way that business is conducted. The newe-business solutions offer innumerable opportunities forcompanies that are willing to act.